California’s Woes and Prop 13

I guess a better title would be “California’s Woes and Prop 13, Not.” Also, never let it be said that Our Volokh Conspiracy – and its commenters – do not drive the intellectual agenda.

William Voegeli, a couple of whose articles on California’s finances have been linked here (see California tag), and who also provided a nice short commentary for VC on the topic, has a new piece in CityJournal on the legacy of Prop 13. He told me in an email that it got started on account of being struck by how many VC commenters on his earlier post attributed California’s parlous fiscal state to Prop 13. Hence the new article, “Don’t Blame Proposition 13.” Likewise I’m pleased to announce the publication of his new book, Never Enough: America’s Limitless Welfare State. Here is a bit from the California Prop 13 article :

According to liberals in politics, journalism, and academia, Proposition 13 is the reason for California’s worsening fiscal nightmare and the declining quality of the state’s public services, and the motives behind it were deplorable. And because Prop. 13 ignited a national tax revolt that remains potent, the Left also blames the measure for much of what it thinks has gone wrong in American political life generally over the past three decades.

Yet no matter how often their moral and intellectual “superiors” denounce them, California taxpayers continue to insist that the problem isn’t their purported stinginess but their government, which makes lousy use of the considerable funds that it continues to receive. On this point, the voters aren’t being stubborn, greedy, or stupid. The voters are right.

The first thing to recognize is that Proposition 13 did not destroy the tax base of California’s local governments. True, the average property-tax rate has fallen from 2.67 percent in 1977 to 1.1 percent today, observes David Doerr of the California Taxpayers’ Association. But the state still brings in a lot in property taxes. By 2007, the year of the most recent Census Bureau data comparing state finances, California’s state and local governments levied $1,141 in property taxes per capita, less—but only 11 percent less—than the corresponding average, $1,288, for the other 49 states and the District of Columbia. Property-tax revenues in the state have increased from $4.9 billion to $47 billion in the 30 years since Proposition 13. Adjust those figures for inflation and population growth, and property-tax revenues in California were 87 percent higher in 2009 than they were in 1979, chiefly because of rising property values.

And even if one tax is limited, others can rise. A recent article in the California Journal of Politics and Policy by Colin McCubbins and Mathew McCubbins shows that, adjusted again for population growth and inflation, total state and local tax revenues in California were higher ten years after Proposition 13’s enactment than they were just before—and that they were half again as high in 2000 as in 1978. Census Bureau data show that California ranked tenth in the nation in 2007 in terms of per-capita receipts from all state and local taxes (property, income, sales, and excise taxes) paid by individuals and corporations. Per-capita receipts from individual and corporate income taxes were 64 percent higher in California than they were in the rest of the country: $1,764 in California, $1,077 elsewhere. All told, California’s governments received $4,731 per resident from all taxes, 14 percent more than the $4,160 average outside California.

Ah, comes the objection: these numbers unfairly compare California with an aggregate that includes many rural states with low taxes and limited public services. But even if we confine our discussion to the ten most populous states in the nation, home to 54 percent of all Americans in 2009, California remains a high-tax jurisdiction. Its per-capita taxes exceed not only the national average but those of every other high-population state except New York ….

The Californians who refuse to jettison Proposition 13 have a well-founded suspicion: that the state’s public sector is starving on its high-calorie diet because of mismanagement and capitulations to public-employee unions ….